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TMI Blog1983 (12) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... nded or earned in these activities. As for marketing of eggs, it was claimed that the assessee was advancing loans towards poultry farming to farmer members and that this activity was also exempt under section 80P(2)(a)(iii) of the Income-tax Act, 1961 ('the Act'). The ITO accepted the assessee's plea that profit from banking activities will be eligible for relief under section 80P(2)(a)(i). But he was unable to accept the claim that profit on sale of eggs can be treated as activity for 'the marketing of agricultural produce of its members'. He also took the view that the profit on sale of consumer goods to its members will be liable to be taxed. The assessee went in appeal. After mentioning the assessee's claim that poultry farming was part of activity of its members and that eggs therefrom constituted agricultural produce of its members, the first appellate authority, who dealt with appeals for the assessment years 1977-78 and 1979-80, dismissed the claim on the ground that there was 'nothing in the accounts to substantiate the claim'. The first appellate authority who dealt with the appeal for the assessment year 1978-79 observed that 'poultry farming should be an integral part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome for the income-tax purposes. He tried to obtain assistance also from the decision of the Karnataka High Court in K. Lakshansa Co. v. CIT [1981] 128 ITR 283 where it was held that income from rearing of silk worms is not agricultural income. 5. We have carefully considered the facts as well as the arguments. Bye-laws of the assessee-co-operative society mention in the preamble under 'Area and operation' that it was organised for 'marketing of agricultural produce and supply of agricultural requirements' to persons specified in clause 3. Sub-clause 1 of 'aims and objects' is a general one of promoting economic interests of its members on co-operative principles, while the sub-clause 2 which appears to indicate the main object reads as under : " To borrow or to raise funds to be lent out to its members at a moderate rate of interest mainly for their agricultural needs, viz., seasonal agricultural operations, development of irrigation facilities, agricultural machinery, orchards, piggery, sheep rearing, dairy, poultry and for other agricultural needs of members and society and to receive fixed deposits. " There are also other objects relating to various other types of activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agricultural produce. The first appellate authorities more or less conceded that if poultry farming is an integral part of agricultural operations, eggs from such farms could be agricultural produce. But the learned departmental representative would like to support the order even from the point of view that eggs from poultry farm could never be treated as agricultural produce. We would, therefore, discuss this issue from this angle. 6. The learned departmental representative had laid great reliance on citations dealing with agricultural income and provisions like section 80JJ to support that poultry income could never be agricultural income. The issue before us is not whether income from poultry farming is agricultural income, but whether the eggs produced by farmers as part of their agricultural activities could be treated as agricultural produce. The revenue is, no doubt, right in contending that the meaning of agriculture in the context of definition of agricultural income under the income-tax law has to be confined to those activities related directly to land and not those merely having relationship with land or connected with the land. But should such a definition of agricul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hedule B covers the income. " Though these decisions were noticed by the Supreme Court, the final definition of agricultural income as evolved by it in the classic case of CIT v. Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466 was narrower and did not comprehend dairy farm or poultry farm in India. But the reason is not far to seek. The Supreme Court in this decision before laying down the law on the subject after survey of decided cases, had the following preamble in Raja Benoy Kumar Sahas Roy's case : " It may be noted at the outset that the definition of 'agricultural income' given in section 2(1) of the Indian Income-tax Act is in identical terms with the definitions of that term as given in the various Agricultural Income-tax Acts passed by the several States. It will be idle therefore to treat 'Taxes on Agricultural Income' which fall within the legislative competence of the State Legislature as having no relation at all to the corresponding provisions of the Indian Income-tax Act. Once it is determined that the income in question is derived from land used for agricultural purposes by agriculture, it would be agricultural income and as such exempt from tax under section 4(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... furnished some more. Biswas' Encyclopaedic Law Dictionary (1979 edition) defines Agricultural Produce as under : " Things which have a situs of their production upon the farm and which are brought into condition for uses of society by labour of those engaged in agricultural pursuits as contra distinguished from manufacturing or other industrial pursuits. That which is the direct result of husbandry and the cultivation of the soil. The product in its natural unmanufactured condition. " Such is the meaning given also in U.S. (where the word farming is preferred to agriculture) as extracted from same dictionary : " Farming purposes : These words are not limited in meaning to mere cultivation of soil and maintenance of improvements thereon for such purposes, but include raising of livestock, as well as production of farm crops directly from soil. State v. Superior Court for Walla Country, 168 Wash. 142, 10 p. 2d. 986, 987. See Farming Operations. Farming operation : Term includes farming, tillage of the soil, dairy farming, ranching, production or raising of crops, poultry, or livestock, and production of poultry or livestock products in an unmanufactured state. Bankruptcy Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Schedule to the said Act lists 'eggs' as the third item immediately after 'fruits' and 'vegetables' and prior to such items like 'dairy produce', 'coffee', etc. No doubt, it could be argued that the definition of 'agricultural produce' to include eggs in the Agricultural Produce (Grading and Marking) Act or the specific inclusion of poultry as part of agriculture under the Agricultural Refinance (and Development) Corporation Act, pertain to the purposes of those Acts and does not and cannot extend the meaning of 'agricultural produce' in section 80P(2)(a)(iii) of the 1961 Act. It would have been so, if the word 'agriculture' did not at all have a wider and natural meaning so as to comprehend all farm activities. As noticed earlier, the narrower meaning had to be preferred for purposes of taxation of agricultural income because of the specific definition of agricultural income necessitated by federal polity. That does not mean that the ordinary meaning gets lost for all purposes of the Act. There is also no reason why the meaning assigned to agricultural produce in some other enactment should be totally ignored. It must be remembered that 'agricultural income' has a definition i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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